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rSmart

Why we like rSmart

About

rSmart provides world-class support and service to the $12.3B higher ed Learning Management System (LMS) and Enterprise Resource Planning (ERP) open-source software markets (JP Morgan, Gartner, Ovum Study, 2010). rSmart deploys a "RedHat-like" subscription and support services model built on the community-developed Sakai and Kuali platforms. rSmart provides a suite of mission-critical learning, teaching, research, financial and administrative systems in either SaaS or on-premise modalities. By utilizing open-source software, rSmart enables scalability, flexibility, responsiveness, and a total cost of ownership of approximately 50% of the cost of competing systems.

Thesis

There is a major shift underway in the higher education software market today, largely driven by continuing IT budgetary constraints, demand for higher ROI on technology investments, and most critically, the rapid consolidation of alternative LMS platforms. Today, rSmart is the only company in the marketplace offering a full suite of open-source solutions for higher ed enterprise software.

People

rSmart has assembled an outstanding leadership team at the management and Board level, comprising successful entrepreneurs and thought leaders in higher education, open-source software and SaaS. In addition, rSmart is the only commercial enterprise to have Board seats on both the Sakai and Kuali Foundations.

Management Team

John Robinson, Co-Founder and Chairman

Widely recognized visionary in higher education; for more than 35 years he has been serving colleges and universities worldwide with innovative software technology

Chris Coppola, Co-Founder, President and CEO

Spent more than a decade as an entrepreneur designing, engineering and managing the development of e-learning solutions for colleges and universities; has helped build the Sakai and Kuali communities into robust and sustainable organizations

Tony Potts, Co-Founder and CTO

Work on open-source projects has spanned many fronts, from lead developer on OSP 1.5 to architect and development manager on the Kuali Financial System project; author of seven computer books on subjects ranging from Java development to 3D graphics

Product

Sakai is primarily deployed as a SaaS model. rSmart released its first commercial product, Sakai Collaborative Learning Environment (CLE) in late 2007. Sakai CLE delivers multiple learning delivery modes, and also helps to facilitate closer scholarly interactions between students and educators. rSmart currently has 50 customers that subscribe to its Sakai offering, and has a very high retention rate thus far (90%+). Kuali is primarily deployed on-premises given the complexities and modularity of an enterprise resource planning system. Kuali has four primary modules today, with three additional modules planned for release over the next three years. rSmart currently has five clients that have deployed Kuali Financial.

Potential

The $3.6B higher ed LMS market (JP Morgan, Gartner 2010) is poised to experience seismic shifts over the next 36 months. Perennial market leader Blackboard has seen its U.S. higher ed market share drop, and Blackboard's acquisitions of WebCT and ANGEL Learning will no longer be supported after 2014. This sunsetting of two major LMS platforms means that over 875 universities currently using ANGEL/WebCT will be forced to migrate from their existing platforms. Among the $8.7B higher ed ERP market (Ovum Study, 2010), Kuali has significant room for penetration. rSmart sits in a "sweet spot" in this market largely because Oracle has difficulty moving downstream due to minimum contract size, and SunGard/Datatel have experienced trouble scaling to large-university size.

Megatrends

Knowledge

Internet

Consolidation

Outsourcing

How Big Can This Be?

As the only company in the higher ed open-source software market offering a full suite of open-source solutions, rSmart has the potential to take significant market share. Given the massive market changes underway, as well as rSmart's reputation for world-class service and support, the Company is poised to become a market leader.

Predictability

rSmart's SaaS model provides for significant visibility on recurring future revenues. In addition, the Company has seen very strong renewals from customers, with renewal rates of 90%+ over the last three years. Also, as rSmart continues to win new marquee customers (including Notre Dame, University of California, Cornell, and Tufts, among others), the Company should be able to leverage these wins into significantly higher market penetration.

Risks

Gauging the demand for open-source ERP is difficult. While LMSs represent an easier installation and are SaaS-delivered, ERP switching costs are much higher, and potentially difficult to maintain in open-source mode without significant technical assistance. Moodle is a significant competitor in the LMS space, and has significantly higher market share than Sakai, owing largely to the fact that Moodle was launched in 1999 (2001 in current commercial form).

% of GSV figures are based upon the fair value of each holding as of March 31, 2015, or the cost basis of the holding (exclusive of transaction costs) if the investment closed subsequent to March 31, 2015. In either case, these values are divided by the net assets of GSV Capital as of March 31, 2015.